New Thinking: Green practices like recycling, reusing and reducing waste can cut costs because they make a company more efficient.

Recalling Michael Douglas’ character “Gordon Gecko “ in the 1987 film “Wall Street” statement that “Greed is Good”, MIT Sloan’s basic message is a bit of a twist- “Green is Good”. Manufacturing is showing with increased frequency, that companies incorporating lean practices in manufacturing, are (by design or accident) becoming more “green”. In fact a 2009 study by a research group suggested that “lean companies are embracing green objectives and transcending to green manufacturing as a natural extension of their culture of continuous waste reduction, integral to world class Lean programs.” This is especially true for companies that integrate a number of proven methods e.g. ISO quality and environmental management systems, to meet environmental compliance and stakeholder needs. This is more rapidly accomplished with a dedicated corporate commitment to continual improvement, and incorporating ‘triple top line’ strategies to account for environmental, social and financial capital.

What is “Lean”?

‘Lean’ Manufacturing is a set of continuous improvement activities closely connected with the Toyota Production System (TPS) and Just-In-Time Manufacturing systems. One emerging working definition of Lean is “The elimination of waste everywhere while adding value for customers”. This definition is a natural fit with sustainability and the “Lean and Green” business ethic. Lean manufacturing has demonstrated how companies have saved or avoided enormous operating and maintenance costs and significantly improved the quality of their products.

Lean manufacturing looks at manufacturing from a systems perspective, which includes a thorough evaluation of upstream and downstream process inputs and outputs. Viewed this way, suppliers and customers play a critical role in successful lean manufacturing. Heavy emphasis is placed on design and innovation and obtaining input of from supply chain partners, individuals and organizations through a process called ‘value-stream mapping’ (hey that’s my blog name too- ironic?…not).

The Lean, Green and Supply Chain Intersect

As I have previously said, even without specifically targeting environmental outcomes, lean efforts have been demonstrated to yield substantial environmental benefits (pollution prevention, waste reduction and reuse opportunities etc.). However, because environmental wastes and pollution are not the primary focal points, these gains may not be maximized in the normal course of a lean initiative. This is because lean waste is by its nature not always in sync with typical environmental wastes.[1] I argue that by looking deep into your your value chain (upstream suppliers, operations and end of life product opportunities) with a ‘green’ or environmental lens, manufacturers can eliminate even more waste in the manufacturing process, and realize some potentially dramatic savings

Where ‘lean’ creates a positive view (future state) of a process without waste, ‘green’ creates an alternative view of a sustainable future for organizations that play in the global marketplace or offer a unique disruptive innovation. Lean and green approaches to manufacturing not only leverages compliance issues but also puts companies on the path to going beyond compliance. The graphic below from the U.S. Environmental Protection Agency applies the key ‘lean waste’ types in an environmental context, and crosswalks how lean waste issues can have direct environmental impact on an organization.

Using an example set by Subaru of Indiana,the MIT study shows how there are many proofs to the axiom that prevention of pollution and continually improving efficiencies with an environmental benefit works even in lean economic times. Subaru found that:

As previously mentioned, becoming a green organization as part of a lean initiative occurs sometimes by design, and sometimes by accident. A research study from the Sustainable Supply Chain Group at the University of Tennessee, College of Business Administration found some interesting results when evaluating how lean manufacturing, sustainability and supply chain management may at times be complementary. The study found, among other things that: 1) Firms tend to have more sophisticated lean strategies than green strategies, and because of this awareness of ‘sustainability’ in supply chain management circles is less mature; and 2) Lean and green initiatives overlap, where projects that meet lean objectives often provide unanticipated green benefits.

Extending Lean and Green to the Supply Chain

Establishing initial goals for manufacturing efficiencies include maximizing parts, machine and material utilization, human movement and of course reducing waste. This series of continuous improvement steps offer a cornerstone for reaching both a green and efficient supply chain. But how can manufacturers work beyond the ‘four walls’ of their organizations to green their supply chain? A green focus in supply chain management requires working with upstream suppliers and downstream customers, performing analyses of internal operations and processes, reviewing environmental considerations in the product development process, and looking at extended stewardship opportunities across the life-cycle of one or more intermediate or final products.

Lean Tools You Can Use

So far, I’ve laid a foundation for Lean Manufacturing and the intersection with supply chain management. This next section presents a couple of widely accepted practices that are used in Lean design and manufacturing, which can be modified to capture supplier network considerations.

Value-Stream Mapping

A strategic approach to mapping environmental and lean opportunities would be to map the ‘value-stream’ of one or more products as a way to seek where the greatest waste reduction and environmental impact reduction opportunities are. Value stream mappingarrived on the business process landscape with the emergence of Lean engineering, design and manufacturing. A process-and systems based methodology, value stream mapping can help organizations to identify major sources of non-value added time and materials resources i.e. waste that flow into the manufacturing of a particular product or (even) service; and to develop an action (or “Kaizen”) plan to implement less wasteful practices and processes. From an environmental perspective, practitioners can also look at processes from an environmental, health and safety point of view, focusing on processes tending to use great amounts of resource inputs and that generate waste outputs.

To illustrate what I mean, a value-stream map example (presented below) in a report issued by the U.S. EPA on Lean and the Environment depicts how supply chain vendors can interact in the production of a product and the resource waste that can result. The areas noted in green represent interaction points with environmental, health and safety and related environmental loads associated with intermediate production steps. Clearly the four vendor points of interaction can carry their own environmental footprints just in the trucking and distribution of raw materials and products (air and waste emissions for instance).

Typical steps in value stream mapping include:

Select a product or process(es)

Through interviews and work observations, collect data on the ‘current state’ of the value stream (inputs and outputs)

Using a cross functional team (CFT) of knowledgeable staff, develop a ‘current state’ value stream map; focus on identifying over consumptive or waste generating activities

With the CFT in place, brainstorm ideas to improve resource use, production flow, waste capture and reduction, reuse and off spec material reuse, and labor/time management

Develop a implementation plan, complete with authorizes and responsibilities

Develop continual improvement measurement and monitoring program

And last but not least…get started!

Vendor Survey and Qualification

Manufacturers also supplement their Lean efforts by surveying their supply chain partners and asking a series of questions designed to identify where the resource consumption and waste management opportunities may lie. These questions will help determine if technology, operational practices, enhanced training and awareness or other tools can make their company more sustainable and lead them down the path to make the decision that best meets their business needs. These questions include but are not limited to:

How can I leverage my manufacturing capabilities and processes in a way that optimizes per unit material resource consumption?

Can I work collaboratively with my intermediate parts or materials suppliers to use life cycle design practices and manufacture parts with lowered environmental footprints?

How can I encourage suppliers to increase equipment efficiency, reduce manufacturing cycle time, reduce inventories, streamline processes or seek quick returns on investment?

Can I improve my sales and operations planning to optimize production runs and reduce resource loads or generated wastes?

How can I work more closely with logistics and transportation partners to optimize shipment schedules, customer deliveries, warehousing, routing and order fulfillment?

Can I work with my customers and product designers to improve packaging to optimize space reduce materials use and improve load management?

How can I collaborate more closely with customers to enable reverse logistics and profitable product reusability?

What types of value-added training and development programs can I develop to promote lean and green opportunities with my suppliers?

Lean-Green Synergies Are Not Without Challenges

The same University of Tennessee authors who explored the intersect of lean, green and supply chain also discussed found that some potential conflicts with certain types of lean strategies leading to changes in supply change management. For instance, they noted that “lean strategies that require just-in-time delivery of small lot sizes require increased transportation, packaging, and handling that may contradict a green approach. Introducing global supply chain management into the green and lean equation increases the potential conflict between the green and lean initiatives.”

So as companies begin to implement lean and green strategies in supply chains, especially large and complex global supply chains, manufacturers need to explore the overlaps and synergies between quality-based lean and environmentally based ‘green’ initiatives, and understand the various trade-offs required to balance possible points of conflict. If your organization been reluctant to engage your supply chain or implement or maintain environmental initiatives in your product manufacturing because of the perception that you can’t afford it, then think again. It is more likely that you cannot afford to ignore it.